Iran has started charging up to $2 million per vessel for 'safe passage' through the Strait of Hormuz, sparking opposition from major global players.

The Iranian government has begun charging vessels up to $2 million for 'safe passage' through the Strait of Hormuz. The strait is a vital energy corridor between Iran and Oman, carrying one-fifth of the world's oil and gas. Iran's government has justified the fees as war reparations and payment for navigational services and security.

International Opposition

The United States and China have agreed to oppose the levy, with the US State Department urging shipping companies not to pay the tolls. Gulf countries have also rejected the move, labeling it a 'protection racket'. The Institute for the Study of War think tank has criticized the fees as a maritime 'protection racket'.

International Maritime Law

Under the United Nations Convention on the Law of the Sea (UNCLOS), vessels have the right of transit passage through international straits like the Strait of Hormuz. Coastal states can only charge limited service charges, including pilotage and towing. The UNCLOS rules state that transits must be allowed to happen without interference from the coastal state.

Comparison to Other Waterways

Canals like the Suez and Panama are man-made waterways that can charge fees for passage. The Suez Canal generates $4 billion in annual revenues, while the Panama Canal Authority is permitted to charge fees under separate treaties. Both canal operators charge less than half the fees that Iran is reportedly charging. Russia and Canada also charge fees for passage along certain routes, such as the Northern Sea Route and the Northwest Passage.

Dispute Resolution

The dispute over the Hormuz charging row remains a major obstacle in the ongoing peace talks between the US and Iran. The US insists that the strait must fully reopen as international waters, allowing ships from all nations to pass without Iranian control or fees. The US has warned that firms that pay the tolls could face secondary US sanctions for doing business with Iran.

Key points

• Iran is charging up to $2 million per vessel for 'safe passage' through the Strait of Hormuz.
• The US and China have agreed to oppose the levy.
• The Strait of Hormuz carries one-fifth of the world's oil and gas.
• The UNCLOS rules state that coastal states can only charge limited service charges for transit passage.
• The Suez Canal generates $4 billion in annual revenues from passage fees.
• The US has warned that firms that pay the tolls could face secondary US sanctions.